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Zimmer Reports Second Quarter 2004 Financial Results

WARSAW, Ind., Jul 28, 2004 /PRNewswire-FirstCall via COMTEX/ --

Second Quarter Highlights

Zimmer Holdings, Inc. (NYSE: ZMH; SWX: ZMH) today reported net sales of $737 million and diluted EPS of $0.47 reported and $0.58 adjusted* for the quarter ended June 30, 2004. The Company's sales and diluted earnings per share results, on a reported and adjusted* basis, exceeded both the high end of the Company's previous sales guidance of $730 million and earnings per share guidance of $0.42 reported and $0.55 adjusted*, and First Call estimates of $733 million and $0.55 adjusted*.

The Company's reported results reflect its acquisition of Centerpulse AG on October 2, 2003, and Implex Corp., on April 23, 2004. Reported results include acquisition and integration expenses, inventory step-up and the prior year cumulative effect of a change in accounting principle for instrumentation, as applicable.

"The marketing and financial benefits of the Centerpulse acquisition continue to exceed our expectations," said Ray Elliott, Zimmer Chairman, President and CEO. "Our earnings growth and the integration execution are a tribute to our team. We began this year with adjusted* EPS guidance of $2.04 to $2.07 and projected 2006 net synergies of $70 to $90 million. With today's communication, we will have increased our 2004 EPS guidance by more than $0.20 from the beginning of this year and raised projected 2006 pre-tax net synergies to more than $100 million."

On April 23, 2004, the Company completed its acquisition of Implex Corp., a privately held New Jersey company. In 2000, Zimmer entered into an exclusive, worldwide strategic alliance for commercialization of Implex's innovative Hedrocel(R) biomaterial, which Zimmer marketed as Trabecular Metal(TM) Technology. Implex, which is now referred to as Zimmer Trabecular Metal Technology, Inc., operates as a wholly owned subsidiary of the Company. Zimmer has more than a dozen development projects involving Trabecular Metal Technology in the reconstructive, trauma and spinal product areas. Trabecular Metal Technology sales for 2005 for all product categories are expected to exceed $100 million.

"During the quarter, we continued to expand our leadership in Minimally Invasive Solutions(TM) (MIS(TM)) Procedures and Technologies with a record 125 surgeons trained in the month of June alone on Zimmer's MIS 2-Incision(TM) Hip Procedure and the MIS QS(TM) Quad-Sparing(TM) Knee Procedure," said Elliott. "We are particularly pleased with our U.S. hip sales growth of 21%. In our case, the message is clear: MIS leadership brings in new business. Zimmer MIS Procedures accounted for nearly 48% of our U.S. hip sales this quarter and the trend is upward. Surgeon demand for MIS surgical skills training is outstripping our capacity, with more than 600 surgeons in the U.S. alone awaiting Zimmer's surgeon-to-surgeon visits and consultations."

The Company is providing a comparison of sales to prior year on a combined* basis in the tables that follow, which includes sales of Centerpulse for the second quarter and the first six months of 2003.


                   Net Sales - Three Months Ended June 30, 2004

        ($ MM)                          Reported            Combined*

                                      Net      %            % Growth
                                     Sales   Growth   Combined*  FX Impact***

    Geographic Segments
           Americas                   $432      58%      16%         0%
           Europe                      198     222       10          7
           Asia Pacific                107      41       13          9
        Total                          737      79       14          3
    Product Categories
        Reconstructive
           Americas                   $342      59%      20%         0%
           Europe                      180     229        9          6
           Asia Pacific                 86      50       13          8
        Total                          608      86       16          4

        Hips
           Americas                   $127      49%      20%         0%
           Europe                       96     406        8          6
           Asia Pacific                 45      57       14          9
        Total                          268     102       15          4

        Knees
           Americas                   $186      54%      21%         0%
           Europe                       72     111        9          7
           Asia Pacific                 36      29        9          8
        Total                          294      61       16          3

        Trauma                         $43      23%      11%         3%

        Spine                          $34     N/A**      2%         2%

        Orthopaedic Surgical Products  $52       7%       4%         3%

    ** Prior year Spine sales were minimal for Zimmer standalone
    *** Effect of changes in foreign exchange rates on growth


Net earnings for the quarter were $116 million on a reported basis, and $144 million adjusted*, an increase of 60% over the prior year. Diluted earnings per share for the quarter were $0.47 reported, and $0.58 adjusted*, an increase of 29% over the prior year.



                  Net Sales - Six Months Ended June 30, 2004

        ($ MM)                          Reported            Combined*

                                      Net      %            % Growth
                                     Sales   Growth   Combined*  FX Impact***

    Geographic Segments
           Americas                   $855      58%      17%         1%
           Europe                      413     258       17         11
           Asia Pacific                212      45       16         11
        Total                        1,480      85       17          5
    Product Categories
        Reconstructive
           Americas                   $673      59%      20%         1%
           Europe                      377     267       17         11
           Asia Pacific                169      53       16         11
        Total                        1,219      92       18          5

        Hips
           Americas                   $248      48%      20%         1%
           Europe                      205     484       17         11
           Asia Pacific                 90      59       15         11
        Total                          543     109       18          7

        Knees
           Americas                   $369      54%      20%         0%
           Europe                      149     130       16         12
           Asia Pacific                 69      34       14         10
        Total                          587      65       18          4

        Trauma                         $89      25%      13%         4%

        Spine                          $67     N/A**      6%         2%

        Orthopaedic Surgical Products $105      12%       9%         3%

    ** Prior year Spine sales were minimal for Zimmer standalone
    *** Effect of changes in foreign exchange rates on growth

Net earnings for the six months were $214 million on a reported basis, and $281 million adjusted*, an increase of 65% over the prior year. Diluted earnings per share for the six months were $0.87 reported, and $1.14 adjusted*, an increase of 33% over the prior year.

Guidance

The Company's second quarter sales guidance of $725 to $730 million included in the first quarter results press release, assumed a foreign exchange growth contribution of $29 million. Due to the strengthening of the U.S. dollar against most currencies throughout the second quarter, the foreign exchange contribution to sales growth was only $21 million. With an $8 million reduced contribution from foreign exchange, our reported sales of $737 million for the second quarter represented an even greater contribution from the Company's underlying businesses.

As a result of the strong quarter and increased confidence in both short- and long-term integration synergies, the Company announced that it is increasing its previous sales and earnings guidance for the full year 2004. Several factors have been incorporated into the Company's sales and earnings expectations. Foreign currency exchange rate fluctuations contributed 7% to the Company's sales growth in the first quarter, but declined to a 3% contribution in the second quarter. If foreign currency exchange rates remain at June 30, 2004 levels, the Company expects the favorable foreign currency effect on the first six months' sales growth will lessen throughout the balance of this year. Due to the weakening of the U.S. dollar throughout all of 2003, the favorable effect of foreign currency movement on sales growth will only be 2% in the third quarter and will result in a slightly negative contribution to sales growth in the fourth quarter. This diminishing contribution to sales growth from foreign currency exchange rate fluctuations is expected to be offset by a strengthening of the Company's underlying sales growth. The $50 million of projected 2004 sales dis-synergies related to the Centerpulse integration have been materializing throughout the first six months, and as the Company nears completion of its non-U.S. distributor integration plans, are anticipated to be fully realized by the end of this year.

Full year sales for 2004 are projected to be in a range of $2,940 to $2,965 million, a net increase of approximately $15 million over the range in the Company's previous guidance. When considering the $40 million reduced contribution to the Company's full year sales growth resulting from the strengthening of the U.S. dollar against most foreign currencies during the second quarter, this really represents a $55 million guidance increase from the Company's underlying businesses. Reported diluted earnings per share for 2004 are expected to be in the range of $1.86 to $1.90, reflecting estimated acquisition and integration expenses of $65 million and inventory step-up of $35 million, net of tax. Adjusted* diluted earnings per share are projected to be in a range of $2.26 to $2.30, an increase of $0.06 over previous guidance and an increase of more than $0.20 from the beginning of the year.

The Company believes First Call estimates for earnings are high in the third quarter, but low for the fourth quarter, with the net effect being an increase in guidance for the second half of the year. Third and fourth quarter sales for 2004 are expected to be in a range of $685 to $695 million and $775 to $790 million, respectively. Reported diluted earnings per share for the third quarter are expected to be in a range of $0.43 to $0.45, reflecting estimated acquisition and integration expenses of $18 million, inventory step-up of $3 million, net of tax, and $0.01 of dilution per share from the Implex acquisition, resulting in adjusted* diluted earnings per share in a range of $0.51 to $0.53, slightly below current First Call estimates. Reported diluted earnings per share for the fourth quarter are expected to be in the range of $0.56 to $0.58, reflecting estimated acquisition and integration expenses of $11 million and inventory step-up of $2 million, net of tax, and adjusted* diluted earnings per share in a range of $0.61 to $0.63, above current First Call estimates.

Conference Call

The Company will conduct its second quarter sales and earnings conference call, which will be broadcast live over the Internet, on Thursday, July 29, 2004, at 8:00 a.m. Eastern Time. The live audio webcast of Zimmer's conference call will be accessible through the Zimmer website at http://investor.zimmer.com . The webcast will be archived for future replay. Individuals who wish to dial into the conference call may do so at (800) 406-1106. International callers should dial (706) 634-7075. A digital recording will be available two hours after the completion of the conference from July 29, 2004 to August 4, 2004. To access the recording, US/Canada callers should dial (800) 642-1687, or for International callers, dial (706) 645-9291, and enter the Conference ID, 8534247. A copy of this press release and any other financial and statistical information about the periods to be presented in the conference call will be accessible through the Zimmer website at http://investor.zimmer.com .

About the Company

Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer is the worldwide #1 pure-play orthopaedic leader in the design, development, manufacture and marketing of reconstructive and spinal implants, trauma and related orthopaedic surgical products. In October, 2003, the Company finalized its acquisition of Centerpulse AG, a Switzerland-based orthopaedics company and the leader in the European reconstructive market. The new Zimmer has operations in more than 24 countries around the world and sells products in more than 80 countries. As a result of the acquisition of Centerpulse, reported 2003 sales were $1.9 billion. Full-year 2003 pro forma worldwide sales of Zimmer and Centerpulse were approximately $2.6 billion. The new Zimmer is supported by the efforts of more than 6,500 employees.

    Visit Zimmer on the worldwide web at http://www.zimmer.com

*Note on Non-GAAP Financial Measures

As used in this press release, the term "combined" sales includes Centerpulse for the first and second quarters of 2003 in order to provide more meaningful year-to-year comparisons. The term "adjusted" refers to operating performance measures that exclude acquisition and integration expenses, inventory step-up and the cumulative effect of the change in accounting principle for instruments. Reconciliations of non-GAAP measures to the most directly comparable GAAP measure are included in this press release.

Zimmer Safe Harbor Statement

This press release contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 based on current expectations, estimates, forecasts and projections about the orthopaedics industry, management's beliefs and assumptions made by management. Forward-looking statements may be identified by the use of forward-looking terms such as "may," "will," "expects," "believes," "anticipates," "plans," "estimates," "projects," "targets," "forecasts," and "seeks" or the negative of such terms or other variations on such terms or comparable terminology. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not limited to, our ability to successfully integrate Centerpulse AG and Implex Corp., the outcome of the pending informal SEC investigation of Centerpulse accounting, price and product competition, rapid technological development, demographic changes, dependence on new product development, the mix of our products and services, supply and prices of raw materials and products, customer demand for our products and services, control of costs and expenses, our ability to form and implement alliances, international growth, governmental laws and regulations affecting our U.S. and international businesses, including tax obligations and risks, product liability and intellectual property litigation losses, reimbursement levels from third-party payors, general industry and market conditions and growth rates and general domestic and international economic conditions including interest rate and currency exchange rate fluctuations. For a further list and description of such risks and uncertainties, see the disclosure materials filed by Zimmer with the U.S. Securities and Exchange Commission. Zimmer disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers of this document are cautioned not to place undue reliance on these forward-looking statements, since, while we believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. This cautionary statement is applicable to all forward-looking statements contained in this document.


                            ZIMMER HOLDINGS, INC.
                     CONSOLIDATED STATEMENTS OF EARNINGS
              FOR THE THREE MONTHS ENDED JUNE 30, 2004 and 2003
              (in millions, except per share amounts, unaudited)

                                               2004        2003      % Inc
     Net Sales                                $737.4      $411.1        79%
     Cost of products sold                     201.9        98.4       105
     Gross Profit                              535.5       312.7        71

     Research and development                   38.2        22.7        68
     Selling, general and administrative       297.3       153.8        93
     Acquisition and integration                24.2         1.5       N/A
          Operating expenses                   359.7       178.0       102

     Operating Profit                          175.8       134.7        31
     Interest expense                            8.3         0.9       N/A
     Earnings before income taxes and
      minority interest                        167.5       133.8        25
     Provision for income taxes                 51.4        44.8        15
     Minority interest                           0.2           -       N/A

     Net Earnings                             $116.3       $89.0        31

     Earnings Per Common Share
           Basic                               $0.48       $0.45         7
           Diluted                             $0.47       $0.45         4

     Weighted Average Common Shares Outstanding
         Basic                                 244.3       196.5
         Diluted                               247.9       199.1



                            ZIMMER HOLDINGS, INC.
                     CONSOLIDATED STATEMENTS OF EARNINGS
               FOR THE SIX MONTHS ENDED JUNE 30, 2004 and 2003
              (in millions, except per share amounts, unaudited)

                                                2004       2003    % Inc/(Dec)
     Net Sales                               $1,479.6     $801.2       85%
     Cost of products sold                      421.4      195.3      116
     Gross Profit                             1,058.2      605.9       75

     Research and development                    78.0       44.1       77
     Selling, general and administrative        595.1      303.6       96
     Acquisition and integration                 55.5        1.5      N/A
          Operating expenses                    728.6      349.2      109

     Operating Profit                           329.6      256.7       28
     Interest expense                            18.1        2.3      N/A
     Earnings before income taxes,
      cumulative effect of
      change in accounting principle
      and minority interest                     311.5      254.4       22
     Provision for income taxes                  97.8       85.2       15
     Minority interest                            0.2          -
     Earnings before cumulative effect of
      change in accounting principle            213.9      169.2       26
     Cumulative effect of change in
      accounting principle, net of tax              -       55.1      N/A

     Net Earnings                              $213.9     $224.3       (5)

     Earnings Per Common Share - Basic
         Earnings before cumulative
          effect of change in
          accounting principle                  $0.88      $0.86        2
         Cumulative effect of change in
          accounting principle, net of tax          -       0.28
         Earnings Per Common Share - Basic      $0.88      $1.14      (23)

     Earnings Per Common Share - Diluted
         Earnings before cumulative
          effect of change in
          accounting principle                  $0.87      $0.85        2
         Cumulative effect of change in
          accounting principle, net of tax          -       0.28
         Earnings Per Common Share - Diluted    $0.87      $1.13      (23)

     Weighted Average Common Shares Outstanding
         Basic                                  243.6      196.1
         Diluted                                247.2      198.7



                            ZIMMER HOLDINGS, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                  AS OF JUNE 30, 2004 AND DECEMBER 31, 2003
                                (in millions)

                                              June 30,    December 31,
                                                2004         2003
                                            (unaudited)
     Assets
       Current Assets:
         Cash and equivalents                  $76.9        $77.5
         Restricted cash                        10.4         14.5
         Receivables, net                      531.1        486.4
         Inventories, net                      504.0        527.7
         Other current assets                  205.7        232.6
             Total Current Assets            1,328.1      1,338.7
       Property, Plant and Equipment, net      561.0        525.2
       Intangible assets                       887.6        760.5
       Goodwill                              2,320.1      2,291.8
       Other Assets                            210.5        239.8
       Total Assets                         $5,307.3     $5,156.0


     Liabilities and Shareholders' Equity

     Current Liabilities                      $540.4       $544.0
     Short-term Debt                               -        101.3
     Other Long-term Liabilities               403.0        352.6
     Long-term Debt                            868.9      1,007.8
     Minority Interest                           6.8          7.0
     Shareholders' Equity                    3,488.2      3,143.3
     Total Liabilities and
      Shareholders' Equity                  $5,307.3     $5,156.0


                            ZIMMER HOLDINGS, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE SIX MONTHS ENDED JUNE 30, 2004 and 2003
                           (in millions, unaudited)

                                                               2004      2003
     Cash flows provided by (used in) operating activities
     Net earnings                                            $213.9    $224.3
     Depreciation and amortization                             87.3      41.4
     Inventory step-up                                         49.6         -
     Cumulative effect of change in accounting principle          -     (89.1)
     Changes in operating assets and liabilities
         Income taxes                                          93.6      80.5
         Receivables                                          (44.2)    (38.5)
         Inventories                                          (14.3)    (18.1)
         Accounts payable and accrued expenses                (27.0)     27.6
         Other assets and liabilities                          39.4      (1.2)
     Net cash provided by operating activities                398.3     226.9

     Cash flows provided by (used) in investing activities
     Additions to instruments                                 (74.9)    (51.2)
     Additions to other property, plant and equipment         (30.6)    (13.5)
     Centerpulse acquisition costs                            (18.2)        -
     Implex acquisition, net of acquired cash                (103.7)        -
     Proceeds from note receivable                             25.0         -
     Investments in other assets                               (1.1)    (14.8)
     Net cash used in investing activities                   (203.5)    (79.5)

     Cash flows provided by (used in) financing activities
     Proceeds from exercise of stock options                   49.7      33.4
     Net payments on lines of credit                         (239.4)    (82.3)
     Equity issuance costs                                     (5.0)        -
     Net cash used in financing activities                   (194.7)    (48.9)

     Effect of exchange rates on cash and equivalents          (0.7)      0.8

     Increase (decrease) in cash and equivalents               (0.6)     99.3
     Cash and equivalents, beginning of period                 77.5      15.7
     Cash and equivalents, end of period                      $76.9    $115.0



                            ZIMMER HOLDINGS, INC.
                        NET SALES BY GEOGRAPHIC REGION
          FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 and 2003
                           (in millions, unaudited)

                       Three Months Ended June 30,   Six Months Ended June 30,
                                            %                          %
                           2004    2003  Increase    2004     2003  Increase

     Americas             $432.2  $273.7    58%     $854.9   $539.8    58%
     Europe                197.7    61.4   222       412.8    115.4   258
     Asia Pacific          107.5    76.0    41       211.9    146.0    45
     Total                $737.4  $411.1    79    $1,479.6   $801.2    85


                            ZIMMER HOLDINGS, INC.
                        NET SALES BY PRODUCT CATEGORY
          FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 and 2003
                           (in millions, unaudited)

                       Three Months Ended June 30,   Six Months Ended June 30,
                                            %                          %
                           2004    2003  Increase    2004     2003  Increase

     Reconstructive       $607.8  $326.6    86%   $1,219.1   $636.5    92%
     Trauma                 43.4    35.3    23        88.4     70.7    25
     Spine                  33.8     0.4   N/A        67.3      0.8   N/A
     OSP                    52.4    48.8     7       104.8     93.2    12
     Total                $737.4  $411.1    79    $1,479.6   $801.2    85


                            ZIMMER HOLDINGS, INC.
                            COMBINED* SALES GROWTH
                   FOR THE THREE MONTHS ENDED JUNE 30, 2004
                           (in millions, unaudited)

                                                           Three Months Ended
                                Combined* Net Sales          June 30, 2004
                                Three Months Ended        Reported
                                  June 30, 2003             Net      Combined*
                          Zimmer  Centerpulse  Combined*   Sales     % Growth
     Geographic Segments
             Americas      $274       $99        $373      $432         16%
             Europe          61       119         180       198         10
             Asia Pacific    76        19          95       107         13
          Total            $411      $237        $648      $737         14

     Product Categories
          Reconstructive
             Americas      $214       $71        $285      $342         20%
             Europe          55       110         165       180          9
             Asia Pacific    58        18          76        86         13
          Total            $327      $199        $526      $608         16

          Hips
             Americas       $85       $21        $106      $127         20%
             Europe          19        70          89        96          8
             Asia Pacific    29        10          39        45         14
          Total            $133      $101        $234      $268         15

          Knees
             Americas      $121       $33        $154      $186         21%
             Europe          34        32          66        72          9
             Asia Pacific    28         5          33        36          9
          Total            $183       $70        $253      $294         16

          Trauma            $35        $4         $39       $43         11%

          Spine               -       $33         $33       $34          2%

          OSP               $49        $1         $50       $52          4%



                            ZIMMER HOLDINGS, INC.
                            COMBINED* SALES GROWTH
                    FOR THE SIX MONTHS ENDED JUNE 30, 2004
                           (in millions, unaudited)

                                                           Six Months Ended
                                Combined* Net Sales          June 30, 2004
                                Six Months Ended          Reported
                                  June 30, 2003             Net      Combined*
                          Zimmer  Centerpulse  Combined*   Sales     % Growth
     Geographic Segments
            Americas       $540      $194        $734      $855         17%
            Europe          115       238         353       413         17
            Asia Pacific    146        37         183       212         16
         Total             $801      $469      $1,270    $1,480         17

     Product Categories
         Reconstructive
            Americas       $423      $140        $563      $673         20%
            Europe          103       220         323       377         17
            Asia Pacific    111        35         146       169         16
         Total             $637      $395      $1,032    $1,219         18

         Hips
            Americas       $168       $39        $207      $248         20%
            Europe           35       140         175       205         17
            Asia Pacific     57        21          78        90         15
         Total             $260      $200        $460      $543         18

         Knees
            Americas       $240       $68        $308      $369         20%
            Europe           65        64         129       149         16
            Asia Pacific     52         9          61        69         14
         Total             $357      $141        $498      $587         18

         Trauma             $71        $8         $79       $89         13%

         Spine                -       $63         $63       $67          6%

         OSP                $93        $3         $96      $105          9%



                            ZIMMER HOLDINGS, INC.
           RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS
              FOR THE THREE MONTHS ENDED JUNE 30, 2004 and 2003
                           (in millions, unaudited)

                                                           Three Months
                                                           Ended June 30,
                                                       2004              2003

             Net Earnings                            $116.3             $89.0
             Acquisition and Integration               24.2               1.5
             Inventory Step-up                         18.6                 -
             Tax Benefit of Acquisition
              and Integration and Inventory Step-up   (15.3)             (0.5)
             Adjusted Net Earnings                   $143.8             $90.0



                            ZIMMER HOLDINGS, INC.
           RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS
               FOR THE SIX MONTHS ENDED JUNE 30, 2004 and 2003
                           (in millions, unaudited)

                                                            Six Months
                                                           Ended June 30,
                                                       2004              2003

             Net Earnings                            $213.9            $224.3
             Acquisition and Integration               55.5               1.5
             Inventory Step-up                         49.6                 -
             Tax Benefit of Acquisition
              and Integration and Inventory Step-up   (37.6)             (0.5)
             Cumulative Effect of Change
              in Accounting Principle, net of tax         -             (55.1)
             Adjusted Net Earnings                   $281.4            $170.2



                            ZIMMER HOLDINGS, INC.
            RECONCILIATION OF DILUTED EPS TO ADJUSTED DILUTED EPS
              FOR THE THREE MONTHS ENDED JUNE 30, 2004 and 2003
                                 (unaudited)

                                                           Three Months
                                                           Ended June 30,
                                                       2004              2003

     Diluted EPS                                      $0.47             $0.45
     Acquisition and Integration                       0.10                 -
     Inventory Step-up                                 0.07                 -
     Tax Benefit of Acquisition and
      Integration and Inventory Step-up               (0.06)                -
     Adjusted Diluted EPS                             $0.58             $0.45



                            ZIMMER HOLDINGS, INC.
            RECONCILIATION OF DILUTED EPS TO ADJUSTED DILUTED EPS
               FOR THE SIX MONTHS ENDED JUNE 30, 2004 and 2003
                                 (unaudited)

                                                            Six Months
                                                           Ended June 30,
                                                       2004              2003

     Diluted EPS                                      $0.87             $1.13
     Acquisition and Integration                       0.22              0.01
     Inventory Step-up                                 0.20                 -
     Tax Benefit of Acquisition and
      Integration and Inventory Step-up               (0.15)                -
     Cumulative Effect of Change in
         Accounting Principle, net of tax                 -             (0.28)
     Adjusted Diluted EPS                             $1.14             $0.86




                            ZIMMER HOLDINGS, INC.
        RECONCILIATION OF REPORTED AND ADJUSTED STATEMENTS OF EARNINGS
                   FOR THE THREE MONTHS ENDED JUNE 30, 2004
              (in millions, except per share amounts, unaudited)

                                             Reported               Adjusted
                                               2004     Adjustments   2004
     Net Sales                                $737.4        $ -      $737.4
     Cost of products sold                     201.9      (18.6)      183.3
     Gross Profit                              535.5       18.6       554.1

     Research and development                   38.2          -        38.2
     Selling, general and administrative       297.3          -       297.3
     Acquisition and integration                24.2      (24.2)          -
          Operating expenses                   359.7      (24.2)      335.5

     Operating Profit                          175.8       42.8       218.6
     Interest expense                            8.3          -         8.3
     Earnings before income taxes and
      minority interest                        167.5       42.8       210.3
     Provision for income taxes                 51.4       15.3        66.7
     Minority interest                           0.2          -         0.2

     Net Earnings                             $116.3      $27.5      $143.8

     Earnings Per Common Share
        Basic                                  $0.48      $0.11       $0.59
        Diluted                                $0.47      $0.11       $0.58

     Weighted Average Common Shares Outstanding
       Basic                                   244.3                  244.3
       Diluted                                 247.9                  247.9



                            ZIMMER HOLDINGS, INC.
        RECONCILIATION OF REPORTED AND ADJUSTED STATEMENTS OF EARNINGS
                    FOR THE SIX MONTHS ENDED JUNE 30, 2004
              (in millions, except per share amounts, unaudited)

                                              Reported               Adjusted
                                                2004     Adjustments   2004
     Net Sales                               $1,479.6       $ -     $1,479.6
     Cost of products sold                      421.4     (49.6)       371.8
     Gross Profit                             1,058.2      49.6      1,107.8

     Research and development                    78.0         -         78.0
     Selling, general and administrative        595.1         -        595.1
     Acquisition and integration                 55.5     (55.5)           -
          Operating expenses                    728.6     (55.5)       673.1

     Operating Profit                           329.6     105.1        434.7
     Interest expense                            18.1         -         18.1
     Earnings before income taxes and
      minority interest                         311.5     105.1        416.6
     Provision for income taxes                  97.8      37.6        135.4
     Minority interest                            0.2         -          0.2

     Net Earnings                              $213.9     $67.5       $281.4

     Earnings Per Common Share
        Basic                                   $0.88     $0.28        $1.16
        Diluted                                 $0.87     $0.27        $1.14

     Weighted Average Common Shares Outstanding
       Basic                                    243.6                  243.6
       Diluted                                  247.2                  247.2



                            ZIMMER HOLDINGS, INC.
        RECONCILIATION OF REPORTED AND ADJUSTED STATEMENTS OF EARNINGS
                   FOR THE THREE MONTHS ENDED JUNE 30, 2003
              (in millions, except per share amounts, unaudited)

                                             Reported               Adjusted
                                               2003    Adjustments    2003
     Net Sales                                $411.1        $ -      $411.1
     Cost of products sold                      98.4          -        98.4
     Gross Profit                              312.7          -       312.7

     Research and development                   22.7          -        22.7
     Selling, general and administrative       153.8          -       153.8
     Acquisition and integration                 1.5       (1.5)          -
          Operating expenses                   178.0       (1.5)      176.5

     Operating Profit                          134.7        1.5       136.2
     Interest expense                            0.9          -         0.9
     Earnings before income taxes              133.8        1.5       135.3
     Provision for income taxes                 44.8        0.5        45.3

     Net Earnings                              $89.0       $1.0       $90.0

     Earnings Per Common Share
        Basic                                  $0.45      $0.01       $0.46
        Diluted                                $0.45        $ -       $0.45

     Weighted Average Common Shares Outstanding
       Basic                                   196.5                  196.5
       Diluted                                 199.1                  199.1



                            ZIMMER HOLDINGS, INC.
        RECONCILIATION OF REPORTED AND ADJUSTED STATEMENTS OF EARNINGS
                    FOR THE SIX MONTHS ENDED JUNE 30, 2003
              (in millions, except per share amounts, unaudited)

                                             Reported                Adjusted
                                               2003    Adjustments     2003
     Net Sales                                $801.2         $ -      $801.2
     Cost of products sold                     195.3           -       195.3
     Gross Profit                              605.9           -       605.9

     Research and development                   44.1           -        44.1
     Selling, general and administrative       303.6           -       303.6
     Acquisition and integration                 1.5        (1.5)          -
          Operating expenses                   349.2        (1.5)      347.7

     Operating Profit                          256.7         1.5       258.2
     Interest expense                            2.3           -         2.3
     Earnings before income taxes and
      cumulative effect of change
      in accounting principle                  254.4         1.5       255.9
     Provision for income taxes                 85.2         0.5        85.7
     Earnings before cumulative effect of
      change in accounting principle           169.2         1.0       170.2
     Cumulative effect of change in
      accounting principle, net of tax          55.1       (55.1)          -

     Net Earnings                             $224.3      $(54.1)     $170.2

     Earnings Per Common Share
        Basic                                  $1.14      $(0.27)      $0.87
        Diluted                                $1.13      $(0.27)      $0.86

     Weighted Average Common Shares Outstanding
       Basic                                   196.1                   196.1
       Diluted                                 198.7                   198.7




                            ZIMMER HOLDINGS, INC.
             RECONCILIATION OF NET MARGIN TO ADJUSTED NET MARGIN
               FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004
                                 (unaudited)

                                                Three Months      Six Months
                                               Ended June 30,   Ended June 30,
                                                    2004              2004

     Net Margin                                     15.8%             14.5%
     Acquisition and Integration                     3.3               3.7
     Inventory Step-up                               2.5               3.4
     Tax Benefit of Acquisition and
      Integration and Inventory Step-up             (2.1)             (2.6)
     Adjusted Net Margin                            19.5%             19.0%



                            ZIMMER HOLDINGS, INC.
       RECONCILIATION OF OPERATING MARGIN TO ADJUSTED OPERATING MARGIN
               FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004
                                 (unaudited)

                                                Three Months      Six Months
                                               Ended June 30,   Ended June 30,
                                                    2004              2004

     Operating Margin                               23.8%             22.3%
     Acquisition and Integration                     3.3               3.7
     Inventory Step-up                               2.5               3.4
     Adjusted Operating Margin                      29.6%             29.4%



                            ZIMMER HOLDINGS, INC.
           RECONCILIATION OF GROSS MARGIN TO ADJUSTED GROSS MARGIN
               FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004
                                 (unaudited)

                                                Three Months      Six Months
                                               Ended June 30,   Ended June 30,
                                                    2004              2004

     Gross Margin                                   72.6%             71.5%
     Inventory Step-up                               2.5               3.4
     Adjusted Gross Margin                          75.1%             74.9%


                            ZIMMER HOLDINGS, INC.
                   RECONCILIATION OF PROJECTED DILUTED EPS
                      TO PROJECTED ADJUSTED DILUTED EPS
                                 (unaudited)

                                                      Projected Three Months
                                                     Ended September 30, 2004
                                                      Low               High

     Diluted EPS                                     $0.43             $0.45
     Acquisition and Integration, net of tax          0.01              0.01
     Inventory Step-up, net of tax                    0.07              0.07
     Adjusted Diluted EPS                            $0.51             $0.53


                                                      Projected Three Months
                                                     Ended December 31, 2004
                                                      Low               High

     Diluted EPS                                     $0.56             $0.58
     Acquisition and Integration, net of tax          0.01              0.01
     Inventory Step-up, net of tax                    0.04              0.04
     Adjusted Diluted EPS                            $0.61             $0.63


                                             Projected Year Ended December 31,
                                                              2004
                                                      Low               High

     Diluted EPS                                     $1.86             $1.90
     Acquisition and Integration, net of tax          0.26              0.26
     Inventory Step-up, net of tax                    0.14              0.14
     Adjusted Diluted EPS                            $2.26             $2.30

SOURCE Zimmer Holdings, Inc.

Media: Brad Bishop, +1-574-372-4291, bradley.bishop@zimmer.com ,
or Investors: Sam Leno, +1-574-372-4790, sam.leno@zimmer.com , both of Zimmer
Holdings, Inc.
http://www.zimmer.com

Copyright (C) 2004 PR Newswire. All rights reserved.

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